Sales Tax in Minnesota: A Complete Guide for Ecommerce Sellers

Minnesota is an SST member state with one of the broadest clothing exemptions among US states, any clothing item regardless of price is exempt, with no dollar threshold. Minnesota’s 6.875% state rate is among the higher state base rates, and the Twin Cities metro area has additional local and transit additions. Minnesota also has nuanced digital product rules that have evolved in recent years.

Quick reference

Economic nexus

Minnesota’s OR threshold: $100,000 in retail sales OR 200 or more retail transactions into Minnesota in the current or prior calendar year. Either condition alone triggers registration.

Minnesota enacted its economic nexus rules effective October 1, 2018.

Physical nexus

Physical presence in Minnesota creates nexus without any threshold:

• Warehouse, office, or storage facility in Minnesota
• Amazon FBA inventory in Minnesota fulfillment centers
• Employees, agents, or independent contractors in Minnesota
• Sales representatives in Minnesota

Registration

Minnesota is an SST member state. Register through a Certified Service Provider for simultaneous registration in Minnesota and all other SST states at no charge.

Sellers can also register directly with the Minnesota Department of Revenue through its e-Services portal. Registration is free.

Tax rates

State rate: 6.875%

Local additions: Minnesota counties and cities can levy additional sales taxes. Local rates range from 0.5% to 2%.

Metro area rates:

• Minneapolis: 6.875% state + 0.5% county + 0.5% city + 0.15% transit = 8.025% combined
• Saint Paul: 6.875% + 0.5% county + 1.5% city = 8.875% combined
• Bloomington: 7.775% combined
• Greater Minnesota (most cities): 7.125%–7.625% combined

The Minneapolis–Saint Paul metro area has a regional transit tax (Metro Transit) and Ramsey County transit taxes on top of city rates.

What’s taxable

Generally taxable: Electronics, furniture, sporting goods, toys, most tangible personal property.

Generally exempt:

• Prescription medications
• Most food for human consumption (groceries)
• Clothing and footwear (see below, broad exemption)
• Agricultural equipment and supplies
• Residential heating fuel

Minnesota’s clothing exemption: Minnesota broadly exempts clothing and footwear with no dollar threshold. Unlike New York’s per-item cap of $110, any item of clothing in Minnesota is exempt regardless of price. Exceptions include:

• Fur clothing
• Athletic and recreational equipment designed primarily for sport use (hockey pads, cleats specifically designed for sport, etc.)
• Protective equipment designed for a sport
• Costumes and accessories

Notable Minnesota rules:

• Digital products: Minnesota taxes specified digital products, including digital audio works, digital audiovisual works, and digital books purchased permanently (not subscriptions)
• SaaS: Minnesota has guidance that remotely accessed software (SaaS) is taxable as a telecommunications service or computer and data processing service in certain circumstances — Minnesota’s digital product rules are detailed and product-specific
• Food: Minnesota broadly exempts food for home consumption. Prepared food, restaurant meals, candy, and soft drinks are taxable

Shipping taxability

Minnesota taxes delivery charges when the shipped goods are taxable. When all goods in a shipment are exempt (including clothing) the delivery charge is also exempt.

Marketplace facilitator rules

Minnesota enacted marketplace facilitator legislation effective October 1, 2019. Qualifying marketplace facilitators collect and remit Minnesota sales tax on marketplace-facilitated sales.

Remote sellers with no Minnesota physical nexus whose only Minnesota sales are through marketplace facilitators may not need to separately register. Sellers with Minnesota physical nexus must register regardless.

State-specific notes

Unlimited clothing exemption: Minnesota’s clothing exemption is broader than most states. Sellers of apparel (from basic t-shirts to high-end outerwear) should have clothing categories exempt in Minnesota with no price cap. This can affect shipping taxability: if a shipment contains only exempt clothing, the delivery charge is also exempt.

Saint Paul’s high rate: Saint Paul’s 8.875% combined rate is among the highest in the Upper Midwest. Sellers with significant Saint Paul volume should ensure their calculation engine captures the city-level rate correctly.

SaaS and digital products, review carefully: Minnesota’s guidance on software delivered via the cloud has been evolving. Sellers of SaaS or subscription digital products should review current Minnesota Department of Revenue guidance for their specific product type.

SST membership: Minnesota’s SST membership makes multi-state registration straightforward for sellers with nexus across SST states.